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WELBY, BRADY & GREENBLATT, LLP
LEGAL ALERT NO. 3
Master subcontract agreements and short form subcontracts.
Do you use a master contract agreement with separate short form subcontract for each job you do with your subcontractors? If so, will you be indemnified by your subcontractor if the need arises? Take note of this indemnification problem recently decided by New York’s Court of Appeals.
The GC and Sub had a written master agreement covering all projects. The master agreement, which did not identify any specific project, contained an indemnification clause under which the Sub agreed to indemnify the GC in the event the Sub’s work caused any personal injury or property damage.
Several months after the GC and Sub entered into a master agreement the GC retained the Sub under a verbal agreement to do some work on a project. One of the Sub’s workers got hurt on the job. Even though the injured worker was covered by the Sub’s Workers’ Comp policy, as often happens in cases such as this, the worker (and his wife) sued the GC for damages.
The GC started a third-party action against the Sub and its insurance company seeking indemnification and contribution. The Sub asked the lower court to dismiss the third-party action citing Section 11 of the Workers Comp Law, which prohibits third-party indemnification or contribution claims against employers (the Sub here), except where the worker sustained a grave injury or, the claim is based upon an indemnification provision in a contract signed before the worker got hurt. The lower court agreed with the Sub and dismissed the third-party action. It refused to recognize the master agreement because it did not identify the project on which the worker was injured. According to the lower court the exception to Section 11 was not met. The appellate court agreed. The Court of Appeals took a different view of the situation and reversed the lower courts, holding that the master agreement did not have to identify the specific project where the accident occurred.
What can be learned from this? Avoid the problem before it arises.
You don’t want to fight with your sub or its insurance company over whether you will be indemnified. So how do you avoid getting into this situation in the first place? Use a written subcontract. Even if you have a signed master agreement, you should still use a written short form subcontract for every job. Your short form subcontract should identify the project, the contract documents, the scope of work, the subcontract price, and it should also contain an indemnification clause to protect your company in the event of any personal injury or property damage caused by the sub’s work. If you are not sure whether your present subcontract (long or short) form is adequate have it reviewed by your attorney. When was the last time you had this done?
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If you have any questions about the information set forth in this Legal Alert, call us at 914-428-2100. Please understand that this alert provides general information only. It is not intended to provide legal advice. We encourage you to contact an attorney should you desire to discuss specific situations for which you may need specific legal advice.
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